Korean giant Samsung’s Mumbai and New Delhi offices were searched last week by India’s directorate of revenue intelligence (DRI) for alleged custom duty evasion, and now a consignment of its 5G gear is stuck at the Mumbai port.
This comes days after the company told Indian officials that it would not apply for India’s production-linked incentive (PLI) scheme for telecom equipment in the absence of a strong business case.
The company is being investigated by the DRI for possible evasion of customs duties for telecom gear through the Free Trade Agreement (FTA) route without proper value addition as per rules, as per a report by the Economic Times.
The report said that the DRI officials had told Samsung to pay duty to get the 5G equipment released. Samsung, however, is taking legal opinion on the matter.
“…DRI officials were evaluating details provided by Samsung on imports of equipment and would determine the extent of duty evasion. The consignment held by customs will be released once the duty leviable on the consignment is paid,” a source was quoted as saying by the publication.
Samsung is expected to conduct a 5G field trial with its only customer, Reliance Jio, which is already piloting its own 5G technology. The gear stuck at Mumbai port may be used for 5G trials by Jio in the country.
The Korean technology company appears to have come under pressure and has now expressed its interest in applying for the production-linked incentive (PLI) scheme for telecom products. It is now planning to approach the Department of Telecommunications (DoT), seeking an extension of the deadline under the scheme.
July 3, 2021, was the last date for telecom gear vendors to submit their applications for the PLI scheme. According to several reports, 37 companies, including Nokia, Cisco, Jabil, Foxconn, Tech Mahindra, and various other domestic vendors, have applied under the scheme.
The report said that India, through senior bureaucrats, expressed its dissatisfaction several times to the top management of Samsung for not applying in the PLI schemes for telecom equipment and IT hardware.
“There is pressure on Samsung for not participating in the PLI scheme for telecom network equipment. The government wants Samsung to invest to make India one of its global production hubs,” another executive told the publication.
Samsung is now re-evaluating and may request the DoT if its application can be accepted since the deadline is now over, the executive added.
Samsung’s executive previously informed the DoT officials that its plants in Vietnam, South Korea and China have sufficient capacity for global demand, including the demand for Jio’s 4G network. It has been importing 4G equipment for Jio from Vietnam and South Korea at zero duties through the free trade agreement (FTA) route.
The company’s vendor rivals Ericsson, Nokia and Huawei have been paying 20% duty to import telecom network equipment for telcos like Bharti Airtel, Vodafone Idea and BSNL.
Samsung is one of the key players to be leveraging the PLI scheme for mobile phones. It was the only company to have achieved investment and output targets under the scheme in the last fiscal year.
The company has a large factory in India’s Uttar Pradesh state, which Prime Minister Narendra Modi inaugurated in 2018. Samsung had then committed Rs 4,915 crore ($673.29 million) investment for the factory. Samsung recently relocated its mobile and IT display production unit from China to Uttar Pradesh and is investing Rs 4,825 crore ($660.96 million).